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Industry hope to halt Smithfield deal through anti-trust hearings

by 5m Editor
5 October 2006, at 10:18am

US - Smithfield Foods Inc.'s attempt to buy over Premium Standard Farms has apparently incurred the wrath of the industry as various consumer and farming organisations are now clamouring for the Department of Justice to evaluate the deal for antitrust concerns.

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Smithfield, the nation's largest producer of pork, recently agreed to pay US$810 million to acquire Premium Standard Farms Inc., the nation's second-largest pork producer and sixth-largest pork processor.

A coalition of farming and consumer organisations, which includes the National Farmers Union and the Consumer Federation of America, opposed the deal, saying it would hamper small family farms' ability to sell their hogs.

Smithfield had promised it would honour all existing contracts after the merger.

Still, it was not enough to pacify critics, who preferred an open and competitive market.

The rapid pace of consolidation in the food animal industry shows no sign of abating. In fact, Pilgrim's Pride, the second largest in the poultry industry, recently made a US$1 billion offer to take over third place Gold Kist to take the lead from industry top-dog Tyson.

Last year, ContiBeef, merged with MF Cattle Feeding Inc. -- a subsidiary of Smithfield Foods Inc., to form a joint alliance in the cattle feeding business.

Besides the acquisition of PSF, Smithfield also recently bought ConAgra Foods Inc.'s branded meats business. That deal, expected to close this month, would give the company even bigger clout in the market.

The double acquisitions, with PSF supplying pork and ConAgra supplying the branding, would make Smithfield an industry behemoth controlling all phases of the beef and pork industry, from production, processing through to retail.

Sen. Mike DeWine, R-Ohio, chairman of the Senate committee with antitrust oversight, said he would hold hearings on the proposed merger.

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